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This study, carried out in the context of the Factor Markets research project,  investigates the impact of the SAPS (Single Area Payment Scheme) on farmland rental rates in the new EU member states. Using a unique set of farm level panel data with 20,930 observations for 2004 and 2005 we are able to control for important sources of endogeneity. According to our results, the SAPS has a positive and statistically significant impact on land rents in the EU. However, the estimated incidence is smaller than predicted theoretically. Land rents capture only 19 cents of the marginal SAPS euro, and around 10% of the SAPS benefit non-farming landowners through higher farmland rental prices. As the share of rented land is higher in corporate farms than individual ones, family farms benefit more from the SAPS than corporate farms do.

Pavel Ciaian, is at the European Commission (DG JRC) and Slovak Agricultural University in Nitra; d'Artis Kancs, European Commission (DG JRC), Catholic University of Leuven (LICOS) and Economics and Econometrics Research Institute (EERI) (d'artis.kancs@ec.europa.eu); Ján Pokrivčák, Slovak Agricultural University in Nitra.